Australian stocks jumped with a sugar hit from China’s cut in official interest rates.
Investors bet that China’s economic stimulus would increase building activity and thus firm demand for Australian iron ore to make steel.
Iron ore stocks, which have been smashed down in recent weeks following commodity price falls, led the market higher.
The local market, which last week lost about 2.7% in value, also took heart from the European Central Bank increasing economic stimulus activity.
First, the scoreboard:
- S&P ASX 200: 5,361.80 +57.49 (+1.08%)
- All Ordinaries: 5,349.00 +56.92 (+1.08%)
- AUD/USD: 0.8688 +0.0016 (+0.18%)
And the top stories on Monday:
1. The Chinese rate cut supported both the ASX and the Australian dollar. The People’s Bank of China announced a 0.40% cut in the one-year lending rate, along with a 0.25% drop in the one-year deposit rate. This is the first time lending rates have fallen since July 2012.
2. BHP will be cutting costs deeper than foreshadowed on the back of savings expected by the proposed demerger. The giant miner now plans to save US$4 billion of annualised productivity by the end of the 2017, an increase of $500 million. Its shares closed up almost 3.8% to $32.90.
3. The mining investment slump is masking solid industry growth. In research released today, Mining in Australia 2014 to 2029, BIS Shrapnel, says: “It is not all bad news in the mining industry, with a boom in mining production, operations and maintenance to roll on right through the next five years.” Fortescue Metals closed up more than 10% to $2.98.
4. HOPU, a private equity group based in China, has paid $61 million for a 15% stake in the Australian uranium miner Paladin Energy. Paladin has been in a trading halt but the shares last traded at $0.38. HOPU paid $0.42 a share.
5. The Santa Claus rally. Today’s jump in the ASX could be more than a one day wonder, according to Oliver Gordon, Rivkin’s Global Investment Director, who wrote a note titled The Likelihood of a Santa Claus rally.